Shares of India’s second biggest motorcycle maker, Bajaj Auto Ltd, rose by 4% after it announced better-than-expected results for the December quarter. The stock has now risen by about 53% from its lows in December. The results confirm that things are not as bad as the markets had feared in early December.

Although volumes fell by as much as 31%, revenues declined at a much lower rate of 16%. This was possible because of a change in product mix, leading to an increase in average realizations. In the domestic market, for instance, average realization rose by as much as 32% on a year-on-year (y-o-y) basis. While sales of two-wheelers fell sharply, those of three-wheelers grew marginally last quarter. As a result, the three-wheeler division accounted for about 15% of total volumes last quarter, compared with about 10% in the year-ago period. Similarly, the company’s shift in product strategy in the two-wheeler segment has resulted in a surge in the proportion of motorcycles with a capacity of at least 125cc.

Both these segments (125cc+ and three-wheelers) enjoy higher margins as well, which has helped the company maintain margins at year-ago levels. Given the free fall in volumes, many analysts had expected a drop in margins, but the company’s ability to maintain margins in the current environment is commendable.

Of course, since revenues fell by 16%, profit before tax too fell at pretty much the same rate (17.3%). Again, the drop in profit could have been much worse, but for the stable margins.

While the valuation of about six times earnings in early December may have been too low, the current double-digit multiple of 10 times trailing earnings look steep for a company whose earnings are declining and has no major recovery in sight.

The company is about to launch a slew of new models, but that may not stem the decline in sales, given low consumer confidence as well as the tight financing situation.